Roku Shares Blast Off to New High After $315 Price Target from Needham

Shares of Roku were skyrocketing on Monday in pre-market trading after Needham reiterated a “buy” rating on the stock and raised the firm’s price target to $315.

Needham analyst Laura Martin cited numerous catalysts when she said Roku’s tailwinds extend beyond the reallocation in consumer spending due to COVID-19.

According to Martin, Roku could see some near-term consolidation near the upper end of its price channel or a breakout from its price channel toward fresh highs.

While Roku has benefited from the reallocation of consumer spending in 2020 due to COVID-19, it could also benefit from connected TV trends over the long term says Martin.

That includes “political ad spending upside; accelerated cord-cutting and 43 million streaming-only U.S. homes; more streaming devices per home; $7 billion more upfront advertising available to CTV; and demographic shifts that force advertisers to adopt CTV faster,” Martin said.

“Roku generates revenue from both AVOD [advertising-based video on demand] and SVOD [subscription video on demand],” she notes. That “implies it is hedged regardless of which companies win the streaming wars. We raise our estimates and price target because we believe Covid pulled forward by one to two years is a key upside value driver for Roku,” Martin added.

The analyst cited an accelerating cord-cutting trend, the proliferation of streaming devices per home, the rise of upfront advertising on CTV, and the demographic shifts that are forcing advertisers to adopt CTV faster.

“We believe Covid-19 dramatically reallocated consumer spending during 2020, so the best question for 2021 is which economic shifts are durable and persistent?” Martin wrote in a commentary.

“The company should be valued as an aggregation platform, similar to iOS (AAPL) and Android (GOOGL) in mobile and (FB) in social,” she said. “Winning platform aggregators typically benefit from winner-take-most economics, and walled gardens like Roku typically maximize value capture.”

Shares of Roku have risen 81% year to date through Friday.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.